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| Alan Pontius |
WALNUT CREEK, CA -- Alan Pontius, director of the firm’s National Office and
Industrial Properties Group, has released the company’s National Office and
Industrial Properties Group report. Highlights include:
National
Office Property Index (NOPI)
■ Software and tech firms clinched rankings for San Francisco (#1), San Jose (#2) and Seattle-Tacoma (#3), which edged out New York City (#4). Los Angeles (#14) slid from fi fth place and momentum markets dislodged San Diego (#8) by one. Plunging vacancy and limited supply lifted Orange County (#5) three spots.
■ Forecast vacancy declines exceeding 100 basis points and 3.0 percent-plus job growth propelled West Palm Beach (#28), Fort Lauderdale (#35) and Jacksonville (#38) each seven places; Tampa-St. Petersburg (#24) and Orlando (#34) advanced six and five places, respectively; and Miami (#7) improved four.
Synergistic
tech, energy and healthcare industries launched Denver (#6) three places and Nashville (#9) six spots. Austin (#11) rose six
places and Dallas/Fort Worth (#20) leveled up five rungs.
■ Supply risk relative to demand muted rankings for Phoenix (#21) and Washington, D.C. (#26). Northern New Jersey (#41), Cincinnati (#43) and Detroit (#46) posted large declines. Improved Midwestern rankings include Kansas City (#29) and Indianapolis (#30). Suburban vacancy clipped three spots from Chicago (#22). Columbus (#27) and Philadelphia (#25) stayed relatively stable.
National
Economy
■ Employers added 2.95 million jobs in 2014, the strongest pace in 15 years. GDP growth surged 5.0 percent as of third quarter 2014, following 4.6 percent in the prior quarter. Nominal retail sales stand 18 percent higher than the prior peak, or 6.6 percent adjusted for inflation.
■ Accelerated consumer spending, manufacturing and trade, parallel with an improved fiscal outlook, will energize business and residential fixed investment. Consensus estimates are 3.1 percent GDP growth in 2015 and an estimated 2.9 million to 3.1 million new jobs created. Upward pressure on wages will follow.
■ The Federal Reserve concluded its quantitative easing program. Inflation remains in check, but liquidity creates upward pressure. Moderate rate increases are expected by midyear.
National Office Market Overview
■ Robust job creation in office-using business segments along with the renaissance in demand from small to midsize businesses bolstered leasing activity in less expensive Class B/C office space.
■ Net absorption of 104 million square feet forecast in 2015 eclipses nearly 54 million square feet of completions. A diverse group of 15 markets comprise nearly 81 percent of expected new supply and 50 percent of demand.
■ Strong dynamics in office fundamentals will reduce the national vacancy rate by 80 basis points to 14.5 percent, resulting in 4.1 percent asking rent growth.
Capital
Markets
■ Investors assume more leasing and development risk and expand into more secondary markets despite ongoing cap rate compression. The 500-basis point spread over 10-year Treasurys remains higher than the long-term average. CBD assets command at least a 120-basis point yield premium relative to suburban assets.
■ CMBS loans comprised nearly three-quarters of single-tenant loans in 2014 and dominated originations across all market tiers.
Investment Outlook
■ Limited supply in most metros has contributed to a tangible shift in market dynamics, with late-recovery markets poised for significant operational improvement, particularly in Florida.
■ Offi ce sales volume grew 18 percent, or approximately $126 billion, marking a seven-year high. Overall office values of $213 per square foot remain 9 percent below the 2007 peak and cap rates measure 7.1 percent.
For a
complete copy of the company’s report, please contact:
Gina Relva
Public Relations Manager
Marcus & Millichap
2999 Oak Road
Suite 210
Walnut Creek, CA 94597
(925) 953-1700 ext.
1716
(510) 999-1284 mobile
(925) 953-1710 fax
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